Rodney Hides proposed tax cuts

Rodney Hide has recommended that we drop the business and top personal tax rate to 25 cents in the dollar, and extend the 15-cent rate up to $38,000.

By doing that, someone on $40,000 a year would be $35.86 better off a week. Someone on $60,000 would be $66.55 better off, but someone on $30.000 will be $23.59 better off. The more you earn, the better off you will be. Rodney Hide's weekly increase would amount to more than a week's unemployment benefit, leading to allegations that Labour's overtaxing is propping up the Working for Families package. Helen Clarks increase will be more than double my weekly net wage.

Oddly enough, if both partners were each earning $30,000 they`ll be getting $50.00 a week more under Hide's proposal, but if the combined income was 60,000 in a one earner household they`ll be getting more like $70 a week extra. So the low income families with both partners working get less tax relief than a higher single income family. That is why income splitting for tax purposes should be considered in the mix with Hide's proposal as it may well provide a greater net income than WFF.

Rodney campares tax cuts with Working For Families.

I assume Hide is not supportive of the non-beneficary accommodation supplement and other WFF benefits. But a family earning $30,000 a year with a mortgage is likely to be getting more than $40.00 per week on the accommodation supplement alone. Which means that the low income earners will benefit more from WFF than it would from Rodney Hides proposed tax cuts. On the other hand, high income earners like the Act MP's will benefit more from a tax cut.

What Act has not outlined is how it will assist low income families to the extent that Working for Families would. United Future has suggested income splitting for tax purposes - but Act can`t be seen to be stealing policy from a party that is likely to have more MP's than it after the next election.

Low income families will not be voting Act. Act will never be seen as the workers party. Act may declare that its policy gives more money in every workers pocket. But WFF's "welfare wage" will ensure that every low income worker who is struggling - and lets face it, most of them will be in families with kids - will have more in their pocket than Act will ever promise them. Single people tend to have more disposable income, and Acts policies appeal to single people whereas Labours WFF appeals to low income families with kids..

Under Working for Families, if the family income went from $30,000 to $38,000, they will get to keep just about everything extra they earn. There may be a small WFF abatement. Under Hides tax policy, they will get the same net pay increase, but have less money in their pocket as all the WFF incentives will be missing.

However the problem is when the pay increases substantially - and cuts across the tax bracket.

Under Working for Families, a family earning $35,000 a year works hard and increases its income by $20,000. They get to keep only $2,500 of the extra $20,000 they earn.

A family with one income earning around $50,000 will keep just 11 cents of every extra dollar they earn. The Government takes 89 cents, 33 cents tax, 30 cents loss of family support, 25 cents loss of accommodation supplement, and 1.2% ACC levies